Senate Republican leaders, on 2 April, released an FY2025 budget resolution that would unlock the reconciliation process and provide the Finance Committee an instruction for up to a $1.5t deficit increase for tax cuts. The resolution sets a current policy baseline under which the roughly $4t cost of Tax Cuts & Jobs Act (TCJA) extensions would not be counted. This means the $1.5t could accommodate additional tax cuts, such as those earlier proposed by President Trump. Tax increases are also possible. Use of a current policy baseline, which has not previously been used in budget reconciliation, is viewed as the best opportunity to make TCJA provisions permanent.

The Senate voted, late on 3 April, to begin debate on the budget resolution and is poised to begin multiple amendment votes, with a final vote on the budget resolution occurring as early as this weekend. The draft Senate resolution has garnered some criticism from House Republicans. Consequently, there is some question whether the Senate resolution can be approved by the House, at least prior to the next congressional recess scheduled to begin on 11 April. The House and Senate must pass identical budget resolutions to formally begin the reconciliation process. In addition to agreeing to a budget resolution, Republicans will also need to resolve high-profile differences in the development of the reconciliation bill, including revenue offsets, among other issues.

The House budget reconciliation instructions remain unchanged from the House resolution that was passed in late February, including instructions to the Ways & Means Committee for a $4.5t net deficit increase to cover TCJA extensions that is reduced if total savings falls short of $2t, and to the Energy & Commerce Committee for at least $880b in spending cuts.

President Trump, on 2 April, announced the details of his reciprocal trade agenda, including imposing 10% universal tariffs on imported products from all countries and an additional country-specific ad valorem tariff rate on countries with which the United States has the largest trade deficits and that impose other trade barriers. The 10% tariffs will generally apply "with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. on April 5," while the higher reciprocal-based tariffs on products from specified countries will take effect on 9 April 2025. A complete list of the new tariffs is in Annex l.

The Executive Order on "Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits" states that certain goods will not be subject to the reciprocal tariffs, including steel and aluminum articles currently subject to 25% tariffs. Certain other goods exempt from reciprocal tariffs include those subject to ongoing trade investigations and others detailed in Annex ll. Additionally, the reciprocal tariffs will not apply to imports from Canada and Mexico, but goods that do not qualify under the US-Mexico-Canada Agreement (USMCA) remain subject to the existing 25% tariffs (10% for Canadian energy and potash imports). A Global Tax Alert provides details.

Also recall that on 26 March, President Trump announced 25% tariffs on finished autos and auto parts. Tariffs on automobiles became effective on 3 April 2025 and tariffs on automobile parts will be effective no later than 3 May 2025.